Crown Castle executive sees small cells moving to multitenant scenarios, smaller markets

The small cell market continues to expand, and Crown Castle’s Mike Kavanagh pointed to two big factors as evidence: Small cell buildouts are starting to happen in smaller, tier 2 markets, and some small cell locations are now serving more than one carrier.

Small cells are “a big part of every big carrier’s build,” he said. “It’s a good time to be in the space.”

In the early days of small cells half a dozen years ago, Kavanagh said that a major installation would cover 50 nodes in a city. Today that number is reaching 2,000—and in some dense markets it can grow to 7,000. “You’re utilizing small cells as a much bigger element of the network build,” he said. “You’ve got to have that tower layer. And you’ve got to have small cells.”

He said in some deployments Crown Castle is seeing 2 to 4 small cells per mile, and in some dense, urban areas that number grows to 7 to 12 per mile. Kavanagh, the company’s SVP of sales and its chief commercial officer, said that Verizon kicked off the push toward small cells, but today all of the nation’s largest wireless operators are embarking on major small cell deployments.

And a big driver of revenues for Crown Castle is the growing trend toward multitenant small cells, which Crown Castle calls “leasing up.” Essentially, Crown Castle typically builds a small cell for one carrier’s equipment, but increasingly the company is adding equipment for a second carrier to that location, thus deriving more revenues per small cell site. Such site sharing is typical in the macro tower business.

“We’re seeing quite a bit of same-pole co-locations,” Kavanagh said, explaining that fully 30% of Crown Castle’s recent small cell efforts include more than one carrier on the site. “If you can share the fiber, you can have a lot of efficiencies.” (Crown Castle has invested billions of dollars purchasing fiber lines across the country, arguing that such efforts will allow it to connect more small cell and tower sites to suitable fiber backhaul.)

And the trend toward servicing multiple tenants on the same small cell site is happening at a faster pace than Crown Castle recorded during the growth of the macro tower business. In April during the company’s quarterly conference call with analysts, CEO Jay Brown said that, with towers, Crown Castle typically added one additional tenant during a 10-year period, but with small cells the company is adding a second tenant on average within five years, according to a Seeking Alpha transcript of the event.

Separately, Kavanagh said that Crown Castle is also seeing small cell deployments expand beyond some of the nation’s larger cities and into smaller markets. That trend was highlighted by Brown during the quarterly earnings call: “I do believe, based on the activity and growth in data, there’s going to be a need for small cells beyond the top 25 markets, and we would expect to see, over time, the carriers expand their desire and need to deploy small cells beyond the top 25 markets. But the capital decisions that we’ve made today and the vast majority of the operating activity that you’re seeing us perform, that’s primarily in the top 25 markets.”

Finally, Crown Castle’s Kavanagh added that new action on the regulatory front is helping Crown Castle speed the deployment of small cells. Specifically, he pointed to state-level legislation aimed at allowing carriers to more cheaply and quickly deploy small cells, as well as recent FCC actions on the topic. “Those two things together auger well together,” he said. “You can put out much higher volumes of small cells quickly.”

Crown Castle’s position on small cells is noteworthy considering some of its rivals, like SBA Communications, have said they plan to focus almost exclusively on macro towers and not small cells.